Appetite to lend still weak, figures suggest

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The appetite to lend to potential mortgage borrowers is still weak, despite a marked expansion in the sector, figures from Moneyfacts.co.uk suggest.

Data released by the Council of Mortgage Lenders earlier today revealed that lending fell by some 32 per cent in January. While there is traditionally a dip between December and January, the contraction was greater than would usually be seen.

In addition, January's gross lending figure of £9.1 billion was the lowest monthly total for just shy of a decade.

However, the deterioration seen in 2010 thus far has actually coincided with a sizeable increase in the number of mortgage products. In fact, since the beginning of January, the sector has grown by 402, to 2003 products.

The number of deals requiring a smaller deposit have also risen; there are currently 157 90 per cent loan-to-value (LTV) products on the market, up from 114 at the beginning of they year – an increase of 37.72 per cent.

Similarly, the number of products requiring a deposit of just 15 per cent has grown from 260 to 334.

There have even been two products added to the 95 per cent LTV market, which had previously seen no activity for months on end.

Rates also look more attractive now than they did at the outset of the year. The average two year fixed rate deal has fallen by 0.10 per cent to 4.78 per cent, with three year fixed registering a fall of 0.20 per cent to 5.32 per cent.

The average two year tracker mortgage rate has contracted by 0.10 per cent to 4.78 per cent since 1 January.

"Mortgage lending is down and prospects for the future mortgage market looks uncertain, but we can positively say that mortgage rates are heading in the right direction," Darren Cook, spokesperson for Moneyfacts.co.uk, said.

"New mortgage rates are steadily reducing and there is a modest return of competition, but an appetite to lend looks to continue to be missing from the equation at the moment."

On 31 December, phase two of the Help to Buy initiative will be withdrawn from the market. It’s certainly done wonders for the high loan-to-value sector, so we thought we’d take a closer look at the significance of the scheme and the effect it’s had.